Shilling Loses Ground Against Dollar

THE increased demand for the greenback put slight pressure on the local currency making it lose ground to close the week at 1615/35. The Barclays Bank market report states that the foreign currency market opened the week to a quiet pace.

Money market analysts said the shilling lost the battle following high demand from oil and manufacturing sectors on the back of declining inflows that were expected from NGOs.

The Standard Chartered Bank said for the second day on Tuesday the shilling lost ground against the dollar on the back of increased demand from the oil sector and declining inflows. “We, (however), expect the pair to stabilise at current levels with medium price volatility,” the bank said on its daily report.

Zan Securities Limited Chief Executive Officer Mr Raphael Masumbuko said as long as the country was making more imports than exports, the shilling remains weak against the US dollars.

Similarly, the euro started the week at its highest level against the dollar in nearly three months as euro zone growth numbers came in better than expected. This is likely to help reduce expectations that the European Central Bank (ECB) will cut interest rates at next month’s meeting.

Traders said the court’s objection to the scheme, which has underpinned the euro over the past two years, had jarred the single currency. The absence of an immediate move by the central bank to add liquidity to the banking system had prompted a rise for the euro against the dollar.

The dollar will disappoint analysts expecting a broad rally in the currency versus major peers as a tapering of Federal Reserve stimulus isn’t improving the US’s interest-rate advantage, according to Goldman Sachs Group Inc.

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